Hardly any economic sector is as hostile to small micro and mini-entrepreneurs as the telecommunications sector.
While in segments such as food, commerce or tourism, governments invest in incubation and strengthening programs; on the contrary, plans for telecommunications SMEs in Latin America seem to be designed to hinder their growth.
How do small ISPs survive in Latin America?
By: Gabriel E. Levy B.
www.galevy.com
The playing field for small telecommunications companies could be defined unleveled in all aspects, from the regulation that in many cases works against them as it is designed for large operators, to the selective discrimination of the so-called high-tech companies, to the most absurd local and regional restrictions.
Although telecommunications MSMEs are key to reducing the digital divide, since they operate where no one else wants to go, very few governments in the region have designed real policies to protect or strengthen them, possibly the only exceptions being Bolivia and Paraguay, where the cooperative model is promoted by various public policies.
The concept of small Internet providers refers to local or regional telecommunications providers with a coverage of no more than 10,000 users and which, in most cases, are organized communities that self-manage the provision of services, with limited infrastructure.
Out of network access subsidy models
In several Latin American countries, there are important government subsidies for the reduction of the digital divide [1]. However, curiously, it is a constant that these subsidies only apply to large Internet service providers (Claro, Millicom, Telefónica, Partners and France Telecom)[2], which is a great contradiction, since these companies have historically chosen not to have a presence in rural or remote areas, due to low profitability margins[3], These are precisely the areas where the digital divide is most marked and where most of the smaller ISPs operate, the same ones that require financial muscle in order to grow, but governments prefer to give economic support to large ISPs that have no presence in these areas and that also do not need financial muscle and much less subsidies, this situation is repeated systematically mainly in Colombia and Mexico[4].
Inaccessible Spectrum
In order to reach the most remote areas in Latin America, small ISPs require mainly wireless technologies, which in a practical sense have become the great reducers of the digital divide. However, access to the radio spectrum in concessioned frequencies is practically impossible for a small ISP, which must conform to the free 2.4 and 5.8 bands, which are totally saturated in the region.
The concept of free band refers to a segment of radio electric spectrum that is released through state regulation, so that any person or company can operate in these frequencies, which allows a non-concessioned use of a limited asset, which, given the small size of the segment, is quickly saturated due to the high demand for its use [5].
Excessive regulation
With the exception of Colombia, which simplified the Internet service authorization process with Law 1978 of 2019, and partially in Mexico, most of the regulations in Latin America are designed to prevent the emergence of new small operators due to the large number of requirements, obstacles, procedures and bureaucracy surrounding the concession and bidding processes, This discourages the legalization of small operators, blocks innovation and increases social gaps, while preventing rural areas with the greatest need for network access from remaining disconnected from the information society, at a historic moment when connectivity is no longer a privilege but a human right [6].
CDN or Datacenters
The Internet we currently consume, unlike the Internet of three decades ago, is more local than global, that is, the information we access, mainly video, is hosted on powerful computers installed at the headquarters of our Internet providers, a technology known as CDN Content Delivery Network [7].
The CDN servers also known as Datacenters, are provided by the big Internet companies (Hightech), i.e.: Amazon, Google, Facebook and Netflix, since they themselves are the main beneficiaries of the traffic that does not collapse their central data channels, in simple terms, these large companies make local copies of their content in each BIG Internet provider, thus achieving that most of the traffic (58% on average), is local.
This benefit is free of charge for Internet providers, since the technology is provided directly by the content generators.
But although CDNs are a relief for all the links in the network supply chain, they are not available for small ISPs, since their traffic is so low that it is not profitable for the large High-tech companies to install this technology, which is why small providers use the total of their data channel, while the large ones “Cache” around 58%, which is finally reflected proportionally in a decrease of the same percentage of costs.
In a practical sense, small Internet providers have a surcharge of around 60% of the access value of the product they provide, and although their users mainly consume the same Google, Facebook or Netflix services as the big ones, there is no traffic relief for them.
Service as a differential value
The above conditions could be defined as the worst possible conditions for an enterprise; however, small ISPs not only manage to survive, but in many cases to grow, something that, although it seems impossible, I have been able to elucidate through observation from practical experience.
In recent days I was resting at the farm of some relatives, due to the remoteness of the area, the only Internet service available is the one provided by a neighbor in the area through wireless technology.
After a heavy rain the Internet service began to fail, reason why the homeowner called the Internet provider, directly to the owner of the company, his neighbor, who in less than two hours was at the farm repairing the inconvenience, always with the best attitude and a legitimate embarrassment on his face for the inconvenience presented, the damage lasted less than a morning and the service was restored.
The knowledge of their own communities, their proximity, the ease of communication, the service and attention provided, undoubtedly mark the turning point that allows not only the survival but also the growth of the small ISPs, titans in the midst of adversity.
In conclusion
Even with many variables against them, in a market designed to favor large operators, small ISPs manage to survive for a very simple reason: “They respect, value and take care of their customers”. This is the great secret of Internet MSMEs.
While in segments such as food, commerce or tourism, governments invest in incubation and strengthening programs; on the contrary, plans for telecommunications SMEs in Latin America seem to be designed to hinder their growth.
How do small ISPs survive in Latin America?
By: Gabriel E. Levy B.
www.galevy.com
The playing field for small telecommunications companies could be defined unleveled in all aspects, from the regulation that in many cases works against them as it is designed for large operators, to the selective discrimination of the so-called high-tech companies, to the most absurd local and regional restrictions.
Although telecommunications MSMEs are key to reducing the digital divide, since they operate where no one else wants to go, very few governments in the region have designed real policies to protect or strengthen them, possibly the only exceptions being Bolivia and Paraguay, where the cooperative model is promoted by various public policies.
The concept of small Internet providers refers to local or regional telecommunications providers with a coverage of no more than 10,000 users and which, in most cases, are organized communities that self-manage the provision of services, with limited infrastructure.
Out of network access subsidy models
In several Latin American countries, there are important government subsidies for the reduction of the digital divide [1]. However, curiously, it is a constant that these subsidies only apply to large Internet service providers (Claro, Millicom, Telefónica, Partners and France Telecom)[2], which is a great contradiction, since these companies have historically chosen not to have a presence in rural or remote areas, due to low profitability margins[3], These are precisely the areas where the digital divide is most marked and where most of the smaller ISPs operate, the same ones that require financial muscle in order to grow, but governments prefer to give economic support to large ISPs that have no presence in these areas and that also do not need financial muscle and much less subsidies, this situation is repeated systematically mainly in Colombia and Mexico[4].
Inaccessible Spectrum
In order to reach the most remote areas in Latin America, small ISPs require mainly wireless technologies, which in a practical sense have become the great reducers of the digital divide. However, access to the radio spectrum in concessioned frequencies is practically impossible for a small ISP, which must conform to the free 2.4 and 5.8 bands, which are totally saturated in the region.
The concept of free band refers to a segment of radio electric spectrum that is released through state regulation, so that any person or company can operate in these frequencies, which allows a non-concessioned use of a limited asset, which, given the small size of the segment, is quickly saturated due to the high demand for its use [5].
Excessive regulation
With the exception of Colombia, which simplified the Internet service authorization process with Law 1978 of 2019, and partially in Mexico, most of the regulations in Latin America are designed to prevent the emergence of new small operators due to the large number of requirements, obstacles, procedures and bureaucracy surrounding the concession and bidding processes, This discourages the legalization of small operators, blocks innovation and increases social gaps, while preventing rural areas with the greatest need for network access from remaining disconnected from the information society, at a historic moment when connectivity is no longer a privilege but a human right [6].
CDN or Datacenters
The Internet we currently consume, unlike the Internet of three decades ago, is more local than global, that is, the information we access, mainly video, is hosted on powerful computers installed at the headquarters of our Internet providers, a technology known as CDN Content Delivery Network [7].
The CDN servers also known as Datacenters, are provided by the big Internet companies (Hightech), i.e.: Amazon, Google, Facebook and Netflix, since they themselves are the main beneficiaries of the traffic that does not collapse their central data channels, in simple terms, these large companies make local copies of their content in each BIG Internet provider, thus achieving that most of the traffic (58% on average), is local.
This benefit is free of charge for Internet providers, since the technology is provided directly by the content generators.
But although CDNs are a relief for all the links in the network supply chain, they are not available for small ISPs, since their traffic is so low that it is not profitable for the large High-tech companies to install this technology, which is why small providers use the total of their data channel, while the large ones “Cache” around 58%, which is finally reflected proportionally in a decrease of the same percentage of costs.
In a practical sense, small Internet providers have a surcharge of around 60% of the access value of the product they provide, and although their users mainly consume the same Google, Facebook or Netflix services as the big ones, there is no traffic relief for them.
Service as a differential value
The above conditions could be defined as the worst possible conditions for an enterprise; however, small ISPs not only manage to survive, but in many cases to grow, something that, although it seems impossible, I have been able to elucidate through observation from practical experience.
In recent days I was resting at the farm of some relatives, due to the remoteness of the area, the only Internet service available is the one provided by a neighbor in the area through wireless technology.
After a heavy rain the Internet service began to fail, reason why the homeowner called the Internet provider, directly to the owner of the company, his neighbor, who in less than two hours was at the farm repairing the inconvenience, always with the best attitude and a legitimate embarrassment on his face for the inconvenience presented, the damage lasted less than a morning and the service was restored.
The knowledge of their own communities, their proximity, the ease of communication, the service and attention provided, undoubtedly mark the turning point that allows not only the survival but also the growth of the small ISPs, titans in the midst of adversity.
In conclusion
Even with many variables against them, in a market designed to favor large operators, small ISPs manage to survive for a very simple reason: “They respect, value and take care of their customers”. This is the great secret of Internet MSMEs.
[1] Internet subsidy schemes of operators in Colombia
[2] Internet subsidy scheme Mexico
[3] La Vanguardia article: Why is the Internet still not reaching the rural world?
[4] Article: Origins of Digital Exclusion in the Colombian Countryside
[5] Specialized article on Free Bands
[6] IDB Specialized Analysis: Citizens, Bureaucracy and Procedures
[7] Article: What are CDNs?
Disclaimer: The published articles correspond to contextual reviews or analyses on digital transformation in the information society, duly supported by reliable and verified academic and/or journalistic sources. The publications are NOT opinion articles and therefore the information they contain does not necessarily represent Andinalink’s position, nor that of their authors or the entities with which they are formally linked, regarding the topics, persons, entities or organizations mentioned in the text.